N.Y. BILL PROPOSES TAX CREDITS FOR AD PRODUCTION COMPANIES

Southern California Has Lion's Share of $5 Billion Industry

NEW YORK (AdAge.com) -- Amendments to a bill winding its way through the New York State Assembly and Senate would offer substantial tax credits to commercial producers. The goal is to boost ad production in the city and state.

New York State Assemblyman Joseph D. Morelle

“New York has always been the center of the advertising industry, but this is changing quickly,” said Joseph Morelle, a Democrat from Rochester who sponsored the bill in the Assembly.

California's ad production
New York’s share of commercial production pales next to California. According to data from recent surveys in 2002-03 of members of the Association of Independent Commercial Producers, Southern California’s share of the total number of commercial production days in the U.S. was 46%. New York’s share in that same time period was 21%. Preliminary 2004 figures show that New York’s share dropped further, to about 18%, said Matt Miller, president-CEO of AICP.

“Unless location dictates otherwise, we always look into New York or Los Angeles first,” said Peter Friedman, exec VP-director, broadcast production, McCann Erickson, New York. McCann’s clients include Verizon Wireless, Staples, MasterCard and Wendy’s. “Most agencies want to stay here. But if no incentive is offered, we have to compete on the open market.”

“Filming can be a windfall of capital for a region,” Mr. Miller said. AICP estimates commercial production is a $5 billion industry in the U.S.

$500,000 in production costs
As the bill is now written, the credit will be available to companies with production costs of more than $500,000 annually and would allow a credit of 10% of production costs paid or incurred in the production of a commercial. The state would set aside $5 million annually in total tax credits. Eligible costs include technical and crew production costs, set construction, shooting, editing and meals.

Some of the issues being ironed out are how to implement a program, as well as ensuring that it is viable, said Chris Delgiudice, legislative director for Mr. Morelle.

The bill is similar in spirit to the Empire State Production Tax Credit, passed in 2004, that gave movie makers 15% tax credit (10% state, 5% city) for shooting most of a film in New York, and will help level the tax credit playing field for commercial producers. “I have every confidence this bill will be just as successful as the Empire State Production Tax Credit in encouraging investment in the commercial production industry, boosting business and providing jobs for New Yorkers,” Mr. Morelle said.

'Discriminatory taxes'
Steve Wax, a partner in production company Chelsea Pictures, supports the tax breaks. “You want to give the same breaks to the commercial industry that the film and TV people get to keep us competitive,” he said. “Without the breaks, revenues are lost and our costs are higher because we have to maintain offices in other cities. To have discriminatory taxes that tax us but not feature film companies is not fair.”

Chelsea Pictures has produced commercials for marketers such as Miller Brewing, Levi Strauss, Reebok and Burger King Corp.

Commercial production companies were not included in the Empire State Production Tax Credit bill for numerous reasons, from timing of the bill to the different requirements production companies need compared to movie studios.

“That bill was very focused on big-budget features,” which are fairly controlled and predictable from a financial point of view, Mr. Miller said.

Developing a program for commercial producers required more time. AICP hired an Albany lobbying firm, Elser Moskowitz Edelman & Dicker, which as been working with legislators throughout the past year.

Mr. Delgiudice said the hope is to have a vote in the next session, which begins in January.